Schwab CEO sees brokerage of the future looking more like Uber

Financial firms will need to take more cues from Silicon Valley, according to Charles Schwab Corp. Chief Executive Officer Walt Bettinger. 

Consumers want their banks and brokerages to offer technology with the same level of personalization they get from ride-hailing and food-delivery apps, Bettinger said in a wide-ranging interview after Schwab reported fourth-quarter results this week.

“The expectations for clients of the experience they have at their financial-services company is formed by the experiences they have at Uber, DoorDash or Amazon,” Bettinger said.

Schwab, a 50-year-old firm with more than $8 trillion of client assets, upended the brokerage industry by eliminating commissions and announcing the $26 billion acquisition of rival TD Ameritrade just months before the pandemic turbocharged trading by individual investors.

Bettinger, 61, discussed the difficulties of stitching together two big companies during an era of remote work, Schwab’s relocation to Westlake, Texas, from San Francisco and what it will take for the firm to offer direct crypto trading, among other topics.

The interview has been edited and condensed.

Bloomberg: What are the biggest changes coming to your industry in 2022?

Walt Bettinger: We’re just dealing with overall trends that the pandemic probably accelerated. The willingness of clients to engage in multiple ways, as opposed to simply in person, is something the pandemic has pushed along. Client expectations are being formed by their experiences outside of financial services. They’re comparing financial-services firms to Amazon or Uber, and they’re looking for those types of experiences.

Bloomberg: What lasting imprint might the pandemic leave in the financial-advice business? 

WB: Trust is still often best built with an organization or with a person via live interactions. But once that trust is built, clients are much more interested and open to doing that in a virtual manner. We’ve been growing so fast, adding over 3 million new households last year alone. We’re in a mode of hiring people, but the clients are open to engaging and interacting in different ways than they might in the past.

Bloomberg: Record trading levels from January 2021 are ebbing. What comes next? 

WB: Inevitably we go through periods in which trading spikes. You arrive at a new normal, and that new normal tends to be higher than it was before. That’s really where we are today — in a range that’s probably about normal for a market that isn’t either plowing forward to record levels on a consistent basis or a dramatic bear market. 

It’s important keep in mind that these volumes are multiples of what they what they were when we acquired TD Ameritrade. We’re dealing with two times where we thought we’d be at five years post-acquisition. 

Bloomberg: What are the challenges of integrating TD Ameritrade into Schwab?

WB: We’re doing the largest integration in the history of the investment services industry in the middle of the pandemic. That makes communication more difficult. It makes building relationships infinitely more difficult. We’re on track for our timing, which is scheduled primarily for the second half of 2023.

TD Ameritrade has some world-class platforms. Thinkorswim is a wonderful trading platform. But what’s different is the scale of making Thinkorswim available to Schwab, with 33 million-plus clients.

Bloomberg: Smaller brokers are appealing to young investors. How will Schwab compete? 

WB: Our average client in that younger population comes to us with $25,000 to invest. We’re winning a different type of investor, with a meaningful amount of money for someone that age. 

Bloomberg: You shifted your headquarters to Texas. Did the pandemic affect real estate plans?

WB: In this day and age I’m not 100% sure what the headquarters definition means. The vast majority of our people are working from home. Virtually any employee who wants to work remotely will be able to do so unless the position absolutely prevents that.

For a firm growing as rapidly as us, it’s probably less that we will shrink our footprint and more that we might not have to add as much despite our significant hiring.

Bloomberg: Will Schwab get into crypto?

WB: Crypto is hard to ignore, right? It’s fairly significant today. We have a lot of ways that clients today can invest in crypto. What we don’t offer is direct trading. We would welcome the chance, if the opportunity presents itself from a regulatory standpoint. There’s a tremendous void in that space today for a firm like Schwab. The transaction costs in crypto trading are exceptionally high, the spreads are exceptionally high.

Bloomberg: Personalized investing is becoming more popular. Why?

WB: The next place we’re going, without a doubt in my mind, is personalization for every investor. Distributors with close relationships with the end clients are going to be in a much stronger position. Rather than just being available for people who have millions of dollars, distributors like Schwab, with our size, we need to get that down to a much more modest asset level.